The higher the interest rate, the more costly it is to keep money in your non-interest-bearing checking account.

In the country of Bora Bora, consumers buy large quantities of alcohol, tobacco, and coffee. Last year, the prices of these goods each increased by 10 percent. The quantities demanded for these goods fell by 10, 3, and 8 percent, respectively. If the government is thinking about imposing a unit tax on one of these goods, which good should they choose to tax to raise the most tax revenue, and why?

a. Alcohol; because the price elasticity is highest. b. Tobacco; because the price elasticity is lowest. c. Coffee; because it will have the lowest tax elasticity. d. Tobacco; because it will have the highest tax elasticity. e. Alcohol; because the burden of taxation would be more even.

The input-substitution effect of an increase in the wage comes about because higher wages:

A. increase production costs, and final good prices will rise, reducing the quantity demanded of the product. B. increase production costs, and final good prices will rise, increasing the quantity demanded of the product. C. make labor less expensive as an input, leading firms to switch to labor as an input. D. make labor more expensive as an input, leading firms to switch to other inputs.